The collapse of two major managed investment schemes, Shield Master Fund and First Guardian, has sparked a federal government crackdown on such schemes, aiming to protect investors and prevent future misconduct. This comes as a shock to the financial services industry, as thousands of Australians lost their retirement savings, highlighting the need for stricter regulations and oversight.
The funds, which collapsed in 2024 and 2025, were characterized by industrial-scale misconduct, according to ASIC chair Sarah Court. Investors, many of whom had switched from regulated super funds, now face a bleak recovery outlook. Liquidators revealed that only a fraction of the invested amount was recovered, leaving investors with minimal prospects of getting their money back.
To address this, the corporate watchdog is taking legal action against the companies responsible for overseeing the funds. The scandal has exposed regulatory gaps in the financial services industry, prompting the government to examine proposals for reform.
Managed investment schemes, established in the late 1990s, have faced scrutiny due to rapid growth and alleged misconduct. The schemes attracted investors through cold-calling and the involvement of financial planners, who facilitated the switch from superannuation funds. However, investor money was allegedly directed towards enterprises controlled by the fund managers' associates.
Assistant Treasurer Daniel Mulino emphasized the need for change to prevent future losses. He noted that high-profile collapses erode investor confidence, making Australians hesitant to invest in legitimate, regulated products. The government's proposals aim to strengthen oversight, ban deals between scheme managers and their companies, enhance compliance and risk management, and ensure independent directors for MIS companies.
The Treasury's consultation paper outlines these proposals, seeking stakeholder input. It emphasizes that good governance practices are crucial for sound decision-making by boards, protecting investors' interests, and reducing conflicts of interest. The government is also considering emergency funds for operators and expanding ASIC's powers to demand information.
This crackdown is part of a long-standing effort to address industry issues. Previous inquiries and proposals dating back to 2001 have called for changes to regulate managed investment schemes. The government's latest consultation aims to create a safer framework for superannuation switching and strengthen trustee governance standards, ensuring the Compensation Scheme of Last Resort's sustainability.
